Scale Up your Kickstarter Project (part 4 of 5: What we learned from Kickstarter)

Thursday, September 26, 2013

This Part 4 of a 5 part series, about what we learned from our first crowdfunding campaign. Here's the first part, about why we found it worth doing in the first place, the second part, about how we spent money to make money, and the the third part, about what we did to promote our campaign.

But this part is my favorite part. This is the part where we really benefited from being in China, and where HAXLR8R really really helped us out.

Figure out how you’re going to scale (or not, strategically).

One of the roughest crowdfunding campaigns I ran across was one where someone was trying to raise something like $2000 to make some hand-carved flashlight enclosures. He made more like $7000, and ended up with way more work than he could actually do himself. He ended up using a more mechanized process, but maybe didn’t manage backers’ expectations around it, so a lot of people ended up disappointed.

What I’m saying is, if you don’t know how you’re going to scale your project up, then too much success will cause you more suffering than a failure. Have a game plan for what happens if you blow through your goal and you have to fulfill 10 times as many orders as you thought. Is it possible? Will it take longer? Will it make each piece cheaper, or will each one cost about the same? Will you have to use a fundamentally different manufacturing process? Do you know how to do that?

Tooling for injection molding.
Injection molding is expensive to start up, but really scalable if you can do it.

This is where we benefitted from talking to manufacturers before we ran our Kickstarter campaign. They helped us design for injection molding, which was new to us, but a very scalable manufacturing process. We were able to get tooling estimates that helped us decide both on our overall funding goal, and on our reward levels. We were able to decide these things based on a well-informed estimate of our production costs (based on an absolutely monstrous spreadsheet that we agonized over for days), not on guesses or a gut feeling of how much it ought to cost -- or at least, we eliminated a large percentage of the guess-work. We set a goal that would cover non-recoverable expenses and allow us to break even on a batch of 300 Clydes. Any more than that, the unit costs only go down, and that puts us in good shape.

You don’t have to choose the same kind of process we did, you just need to know the limitations of your process. If you are going to lasercut something on your office lasercutter, know how many pieces you can do per day. If you can do 400 in a month, then organize your rewards levels month by month, and only allow 400 backers per tier. You can limit your total number of backers by putting a cap on every tier, but we’ve never seen anyone actually do this. Maybe people get ambitious or greedy, but for certain kinds of projects I think putting an absolute cap on your rewards can make a lot of sense.

Also, even if you’re not overloaded on numbers, manufacturing hardware and/or finished products is hard. It’s easy to run into delays, there’s tons of testing and certification to be done, and it’s very hard for a newbie to estimate how long things will take. As we proceed with manufacturing, this fact is never far from our minds. The important thing is to be honest with your backers and tell them sooner rather than later about any problem (and solutions) that pop up.

Coming up next...

Part 5 will be some closing thoughts and practical advice on how to handle all the Kickstarter money you'll surely be rolling in.

In the meantime, take a closer look at Clyde! We'll be sharing more insights into injection molding and PCB production as we move forward, so stay tuned.

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